Saving when you’re earning for the first time

Earning an income for the first time is exciting. Especially because you’re struggling to save while you’re a student. But now that you're working and earning for the first time, maybe at an internship, you’ll need some new insight into how to save when you’re earning a salary for the first time.Remember, this not only gives you the experience you’ll need to apply for proper jobs in a few year’s time, it will also give you the skills you’ll need to start managing your money. While your friends are out at clubs or sleeping late on a Saturday morning, you’ll be making your goals a reality. As Grant Cardone, Us-based motivational speaker and author, says: “Grind while they rest. Study when they party. You’ll live like they dream.”Here are some tips for what to do when you first start earning.Pay your debtsYour debts – probably your student loans, cellphone bill or clothing accounts – need to be paid as soon as your salary lands in your bank account. Ideally, you should pay more to your debtors than the minimum. This will ensure you aren’t paying too much toward interest and instead start to pay off the debt. It also cements the idea in your mind that you shouldn’t spend money you don’t actually have. Becoming over indebted when you’re young is never a good idea.Next, pay yourselfIt’s a generally accepted rule in personal finance that you should pay yourself first. But if you have debts those should be your first priority. So after those are sorted out, you need to put some money away. Personal finance experts disagree on how much you should be saving. But they are in agreement that you should save as much as possible while you’re young so you can begin taking advantage of the magic of compound interest. At a minimum, make sure to save 10% of your income but strive to increase that number every month. Choose to save in high interest accounts, like a unit trust investment. Money in your bank account doesn't earn enough interest, so it’s pointless keeping it there.Learn to budgetBudgeting is often thought of as something awful; something to put restrictions on your life. But really, a budget lets you spend on your priorities. It’s important that you track your spending as soon as you start earning. Soon, it will become second nature. Once you know what you spend, draw up a budget and cut all unnecessary expenses – like buying drinks for the table, meals out and takeaway coffees. Then you’ll need to learn to stick to the budget, making sure you don’t spend more than you earn.Set up a retirement annuityThe tax advantages of this type of account are like no other. Government literally pays you to save money into a retirement annuity. If you do this from the moment you start earning, you’ll be used to putting this money aside each month. You can never miss money you don’t have so organise that this amount of money is debited from your account as you are paid.Figure out your goalsKnowing what your life goals are will help you to make strong financial decisions. If you want to move into your own place or travel overseas, you’ll need savings. By understanding what you want to do and putting the money aside, you can make these dreams a reality.
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